Employer confidence in the UK plummets to levels last seen during the pandemic

Downturn in UK Job Market: The spirited vibe among British employers? It's hit rock bottom, similar to what we saw during the pandemic, thanks to a volatile mix of economic uncertainties and cost hikes.

A recent survey of over 2,000 employers by the CIPD revealed that the number of employers planning to boost their workforce in the next three months has plummeted to levels last seen during the pandemic. Notably, the retail sector has borne the brunt of this slump, with retailers expecting a decline in staff numbers.

The employment balance has taken a hits, dipping from +21 in autumn 2024 to +8. In the private sector, it's even more disheartening, standing at just +11. What's more, 24% of employers are contemplating job cuts in the next three months, a percentage relatively unchanged from the previous quarter.

The median employer planning redundancies aims to axe about 5% of their workforce. This downward spiral can be attributed to the double whammy of increased National Insurance Contributions (NICs) and the National Living Wage (NLW) announced in last year's budget, starting from April 2024.

James Cockett, Senior Labour Market Economist at the CIPD, explains, "Businesses across the UK are now grappling with the full impact of the increased NICs and NLW."

In the Autumn Budget of 2024, Chancellor Rachel Reeves hiked the National Living Wage for workers aged 21 and over by 6.7% and instituted a 1.2 percentage point increase for employers' NICs to 15%.

Given these financial strains, it's no surprise that overall recruitment intentions have dropped from 67% to 61%. Specifically, large private sector employers are hesitant to expand their workforce, with only 32% planning to increase staffing levels, a decrease from 39% in the last quarter.

The CIPD's survey also shows that the median expected basic pay increase has remained steady at 3%, across all sectors. The survey arrives as the government's Employment Rights Bill moves through parliament, introducing measures such as sick pay for new workers and restrictions on 'fire-and-rehire'.

Cockett comments, "The Employment Rights Bill is making landfall in a decidedly different economic landscape than originally anticipated. Employers are already grappling with complexities, and it's crucial the government collaborates closely with them to balance the need for improved employment practices with the potential financial burdens."

He continues, "To assuage employer apprehensions about the bill, the government could prioritize an implementation plan with a clear timeline, coupled with support and guidance, particularly for smaller businesses."

In essence, the UK job market is facing a perfect storm, with factors like increased NICs, NLW, the Employment Rights Bill, and broader economic uncertainty all taking a toll on employer confidence. This uncertainty is leading to careful hiring strategies and a challenging job market landscape.

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